Times have been tough lately. Between a certain health crisis and the latest political issues in Eastern Europe, the global economy has taken a few rough hits. The resulting worldwide recession has naturally trickled down to our finances, with many people feeling the sting.
The economic scene may look bad right now, but that doesn’t mean you have to suffer through it. Even amid the global financial and political chaos, you can put aside a bit of cash to help shore you up in the days to come. It just takes a little bit of discipline and forethought.
In this article, you’ll find tips on keeping more of your hard-earned money during a recession. Whether you’re a student or a full-time working adult (or both), you can use these tips to improve your financial literacy and save like a boss.
What is a Recession?
We’ve been hearing about economic recession since the turn of the century, but not everyone knows exactly what that word means.
Put simply, a recession is when financial activity reduces significantly. The number of available jobs drops, people make less money, industrial production falls, and the nation’s GDP (Gross Domestic Product) plummets.
What You Can Do Before a Recession
You can’t predict when a recession will begin or end, but you can lay a little groundwork to prepare yourself for such times. Below are a few safety nets you can set up to stay afloat, and perhaps even thrive, during an economic downturn:
● Pay Down Your Debts
Everyone has debt; it’s just a part of life. But if you can clear a significant portion of it during the better months, you’ll find it easier to survive during a recession. Start paying off a little more than you usually do and create a better financial standing for yourself.
This serves two purposes: Reducing the overall debt payment period and giving you some cushion when things get difficult. After all, the extra you pay now can be shaved off when you need it later and still leave you paying your debts comfortably.
● Build an Emergency Fund
Putting aside a little of your monthly income specifically for a recession emergency fund is a no-brainer. It doesn’t have to be much, but the more you contribute, the more you can rely on it. Even a five percent deposit of your wages will help build your emergency fund.
● Find a “Recession-Proof” Job
It’s a bit extreme to put faith in your current job on the notion that the economy might thrive, so it might pay to switch paths if you’re not in your dream job now. While no career is truly recession-proof, specific sectors are less likely to suffer during darker days. The following are a few you can consider if you’re looking to change roles:
- Financial services
- Law enforcement
- Utility services
- Emergency services
During a Recession
As things stand, there’s a good chance that we’ll be experiencing a recession for the foreseeable future. News outlets are reporting the coming of the worst financial crisis since 2008. While you can do little to prevent it from happening, there are a few steps you can take during the economic phase to save and grow your money.
1. Establish a Budget
First, you should ensure that you account for every penny you need to spend. Verify that every bill is covered, both important and non-essential. It can be time-consuming, but once you establish what you have and what goes out, you’ll be able to better estimate your savings.
2. Downsize Your Lifestyle
Try to cut out anything you’re paying for that you can easily live without. Perhaps you change that weekly takeout to a once-a-month takeout. Maybe you can cancel your Netflix subscription and replace TV entertainment with fun outdoor activities. Each change in your lifestyle will add a few extra dollars to your savings account.
3. Widen Your Investment Portfolio
Another way to use your redistributed wealth is to earn it. Several potentially great investment opportunities can withstand the worst of a recession. The key is to ensure you’re not leaving all your eggs in one basket. Since a single massive blow to the economy can render whole businesses obsolete, you should add different stocks and cryptocurrencies to your portfolio.
Perhaps you can use some savings to invest in a property or two, providing a steady income and shoring up your own. Bonds are another great option that can earn you a little extra. Sometimes, buying the stocks and holding on to them until the worst is over will be the best option. After all, keeping the money safe for the future is the name of the game.
4. Nurture Your Career
Whether you have recently started a new job or have been employed for a while, taking steps to progress is a reliable way to improve your income and recession savings. During a recession, your employers will be more likely to hold on to their most valuable people. Research any extra courses or options to strengthen your position and increase your value. This can help you get ahead, potentially earning you a promotion and improving your financial security during a rough time.
Just because the economy is suffering doesn’t mean you have to. You can continue to save even during a recession by planning and making changes in your daily life. Take a good, hard look at your finances, see what areas you can improve, and set yourself up for success. Looking to find a financial coach who can give you more personalized one-to-one advice? Book a call with me, and let’s work together on your personal finance plan.